The Red Flags of Workplace Fraud: Eight Employee Behaviors to Keep on Your Radar

Fraud at any level can be happening in an organization, and if you don’t know the signs, it can be difficult to catch. Understanding and recognizing the behavioral red flags displayed by fraud perpetrators can help you detect fraud and mitigate losses. Before we dive into the common signs of workplace fraud, let’s look at an example of what a fraudster may look like at your company.

James seemed like the ideal employee. He worked as a manager in the company’s accounting department for 20 years and was known for being so dedicated, he would rarely take a day off work. In fact, no one could remember the last time James took an entire week away. If you stopped by to visit James, he would more than likely talk to you about how proud he was of his two kids that were in college. On the surface, everything in James’ world seemed normal and happy.

When it was discovered that James had embezzled more than $165,000 from the company, everyone was stunned. How could this have happened right under everyone’s noses? How could a nice, quiet guy like James do something like this?

According to the Association of Certified Fraud Examiners (ACFE) 2022 Report to the Nations, there are eight key warning signs that employers need to be on the lookout for to help detect a problem. In fact, in 85% of the fraud cases reported, the fraudster displayed at least one behavioral red flag. And in half the cases, they exhibited more than one. These are the eight red flags to be aware of:

  1. Living beyond means
  2. Financial difficulties
  3. Unusually close association with vendor/customer
  4. Control issues and unwillingness to share duties
  5. Irritability, suspiciousness, or defensiveness over work activities
  6. “Wheeler-dealer” attitude
  7. Divorce/ family problems
  8. Bullying or intimidation

So, let’s think back on our example with James. Never taking multiple days off was a big red flag. He wasn’t taking the time away because he didn’t want someone to uncover what he was up to. Unfortunately, it had nothing to do with devotion to his company. And his second red flag? Two kids attending college at the same time was putting a great strain on his family’s finances. James had never done anything like this before, as is the case with most fraudsters. According to the ACFE study, 87% of perpetrators were never previously charged or convicted of fraud.

What can you do to protect your organization? 42% of fraud cases are detected by tips with organizations that utilize hotlines. That’s why BerganKDV’s Forensic and Data Services team launched PlainSight, an anonymous hotline tool that empowers employees to speak up when they witness a potentially fraudulent activity. PlainSight includes a web-based tool and traditional phone line that are easily accessible, along with training materials so employees can better detect fraud. Once a tip is reported, our team of certified fraud examiners will assess the tip and assist with the next steps if fraudulent activity is discovered.

Want to learn more about how PlainSight can protect your organization against fraudsters? Request a quote today and one of our team members would be happy to discuss more about the hotline with you.


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CATEGORIES: Forensic and Data Services | Tech & Innovation
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